Reinsurance pool weighed in SB 110 reform

Published: May 13, 2005

The Legislature has winnowed a spate of health insurance reform bills down to two survivors, House Bill 611, now in the Senate, and Senate Bill 125, now in the House. HMOs oppose pieces of both proposals and are urging the Legislature to give the year-old current law, SB 110, more time to spur competition.
They warn against going back to the pre-SB 110 days, when Anthem, Cigna and Harvard Pilgrim held most of the market. But unlucky employer groups complain of recent premium spikes as high as 50 and 100 percent a year under the new system.
Sen. Maggie Hassan, D-Exeter, urged the House to pass SB 125, one of her bills, because, she said, half of all bankruptcies are the result of health-care debt, often among the uninsured. She said the legislation won’t drive rates down in the short run but should stabilize them.
“This bill caps any rate increase at 20 percent the first year for a group with an ill employee,” she told the House Commerce Committee. “It also shares risk throughout the carrier community. It has basic fairness. The uninsured impact the rest of us in our rates. We’re all in the same boat together.”
Sen. Ted Gatsas, R-Manchester, prime sponsor of SB 125, said the measure allows a 350 percent difference in premiums between the healthiest and riskiest subscriber groups. Insurers can go up an additional 10 percent for groups with only one subscriber.
“Two years ago that band was 12-1 (1,200 percent),” Gatsas said. “It needed a lot more scrutiny.”
Rep. Gene Chandler, R-Bartlett, was House speaker when SB 110 became law. He still supports it.
“Repealing SB 110 is a good campaign battle cry,” he said, “but we need to do what works. I’m for fixing the law, not abolishing it. What we had previously wasn’t working.”
An Insurance Department fact sheet distributed to legislators shows that average health costs are climbing dramatically after staying at $145 a month per subscriber between 1993 and 1999. In 2004, the average cost was $284. The increase coincides with the law SB 110 replaced.
Rep. Lee Quandt, R-Exeter, said he has heard horror stories from constituents about the new insurance statute. He’d like to see a nonprofit reinsurance pool with high deductibles and high premiums — a feature of both reform bills now in play. Each would make carriers assume risk instead of cherry-picking the healthiest subscribers, he said, something they are accused of doing under SB 110.
HB 611 lets an insurance company use this pool to cover the older worker with medical problems. The carrier also can eat the risk of insuring that person and save paying the reinsurance premium. SB 125 establishes a reinsurance pool charge on all carriers for every customer, an estimated 600,000 people statewide.
Both bills use fewer rating factors to set premiums than those used under SB 110. SB 125 allows adjustments for age, group size and industry. HB 611 allows rating for those items plus gender.
Both eliminate rating for employee health status or geographic region. The latter change targets relief to the North Country and Seacoast, where premium increases have been especially high under SB 110.
“Those regions have been absolutely devastated by 110,” said Quandt, a Commerce Committee member. “It has let the carriers minimize their risk. It’s become the money transfer business, from us to them.”
Hikes and decreases
Quandt thought SB 125 would get an ought-to-pass committee endorsement, but after a close vote. He said the House floor fight promises to be one of the hottest this term.
“This is a major piece of legislation,” he said. “It will realign the whole small group health insurance market to make premiums more predictable and affordable.”
Paula Rogers, a lobbyist for America’s Health Insurance Plans, which has 1,300 member companies insuring 200 million citizens, reminded lawmakers that SB 110 was supposed to bring New Hampshire in line with policies in other states, lure more carriers to this market and boost competition. Moving forward, she urged conservative changes and greater flexibility in the rating factors.
“Any adjustments away from the current law carry inherent risk of further market disruption, exposing small businesses to further changes in the cost of their coverage,” warned Rogers, a former state insurance commissioner.
Rep. Sheila Francoeur, R-Hampton, chair of the House Commerce Committee, said one of her constituents saw a rate hike from $700 to $1,900 a month - a more than 170 percent increase.
“He was in a group with one person plus his wife,” she said. “It would be wonderful if rates went down. But the cost of health care itself is going up. That’s driving the market. Without that reinsurance pool, the system won’t work.”
Tim Goodrich, policy director for the National Federation of Independent Business, said the state lost 30 health insurance carriers under the old community rating policy, which caused premium hikes of 20- and 60-percent a year. SB 110 replaced that statute.
He said 40 other states have laws similar to SB 110, and they are seeing competitive, cost-effective insurance markets emerge. The new law has attracted four new carriers, he said, along with innovations like health savings accounts.
Attorney Stephen Jeffco, senior partner with Jeffco Starbranch and Soldati of Portsmouth, gave written testimony warning that SB 125 would hurt firms like his that offer the new health savings accounts. In his opinion, the bill would treat them like the much larger insurance carriers.
His law firm now pays $22,000 a year in premiums, Jeffco told lawmakers, compared with $81,000 with Anthem. After covering medical expenses, the firm saved $23,000 and kept that money in a vested account for its employees.
Margaret Burke, co-owner of Mr. Electric in Rollinsford, advised keeping the status quo. She said a similar health savings plan let her four-employee firm provide insurance for the first time in March.
“Not having insurance is a very scary situation,” she said.

This article appears in the May 13 2005 issue of New Hampshire Business Review